Companies are the most widely used business organizations. A registered company is recognized by law as a “person” with such rights and duties as are attributed to it by law.
A company can either be a private or public company. The liability of a company can be limited by shares, limited by guarantee or unlimited liability company. The law provides for 6 types of companies – private company limited by shares, public company limited by shares, private company limited by guarantee, public company limited by guarantee, private unlimited company and public unlimited company.
If you want to form a private company, you need at least 2 members and a maximum of 50 members while a public company requires at least 2 members and has no maximum number of members.
If you want to run certain businesses like banking, insurance, mortgage, you must establish a company in order to run the business. Also, any association, group or partnership carrying on business for profit and with a membership exceeding 20 must be registered as a company, with the exception of Co-operative Societies, Partnership firms of Lawyers and Accountants.
If you want to run a large business, you may consider forming a company as that offers many advantages over partnership or sole proprietorship. In a limited liability company for instance, Shareholders’ personal assets cannot be used to pay the Company’s debt. This is because a company is considered to be a separate legal entity, different from the members of the company. Also, public companies can easily raise money from the public by selling stock.